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Yes you can do it with an internal partition or in an external HDD, just one partition, USB, DVD, all is more or less the same, I have to say that this is one of the best things on the Mac, so easy to backup and restore systems.

NOTICE: back up all your data, and make sure the partition that you are going to use is the correct one, this will destroy all information in that partition

Open Disk utility, and click the desired partition on the left column.

Go to the "restore" tab

At the source, select the dmg file containing the installer (you may need to scan the image first, to do that go to the images menu item and select "Scan image for restore").

At the destination, drag the partition that you would like to use.

Press Restore (erase everything on, at least I prefer it that way).

THIS DESTROYS ALL INFO IN THAT PARTITION.

If all went well, it should copy all info into the partition

Go to system preferences and select startup disk, select the partition that you restored the installer into

Restart.

If all went well, you should be seeing the installer running from your partition, just select the destination for the new installation and all should be ok.

If for some reason the restore didn't work, you may need to mount the installer image and use that "virtual" disk as the source and not the actual image, I've had some trouble in the past and this sorted my problem.